17.30 (CLOSE): A profits warning from GlaxoSmithKline curtailed a rally for the FTSE 100 Index today as shares in the pharmaceuticals giant slid by nearly 5 per cent.

The FTSE 100 Index finished 2.8 points higher at 6798.1, having earlier made headway on the back of gains for Vodafone and outsourcing firm Capita.

Markets have recovered in recent sessions on signs of an easing in tensions between Russia and the West over the downing of a passenger jet in Ukraine.

Drop: GSK issued a warning after a 22 per cent decline in half-year operating profits.

The pound slipped against the dollar, at 1.70, and held steady against the euro, at 1.27, after the latest minutes from the Bank of England showed that low wage growth prevented members from considering a first rates hike in five years.

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GlaxoSmithKline declined almost 73.5p to 1481.5p after it reported a 22 per cent decline in half-year operating profits to £2.94billion and warned that earnings per share in 2014 were now likely to be flat this year.

Shares slumped 6 per cent on the downgrade as the company also highlighted the impact of the stronger pound on prospects for its share buy-back programme.

The company's performance continues to be hit by falling drug and vaccine sales in the United States, driven by competition from generic products.

Vodafone did its best to prop up the London market after former US partner Verizon reported a bigger-than-expected surge in second quarter revenues as it benefits from strong demand from wireless customers.

The UK mobile phone giant, which is due to present its own figures on Friday, rose by 1.3p to 197p.

Outsourcing firm Capita set the pace at the top of the FTSE 100 Index after it achieved a 16% rise in half-year underlying profits to £238million.

It said it secured £1.3billion of major contract wins in the six month period, while revenues improved 13.9 per cent to £2.1billion.

The update prompted Investec to upgrade its rating on the stock from hold to add and caused shares to surge by almost 5 per cent or 55p to 1210p.

Outside the top flight, regional airline Flybe lost initial gains seen after chief executive Saad Hammad highlighted further progress in the company's turnaround.

Having recently announced its first profit in four years, Flybe said the first quarter had seen a jump in its passenger load factor to 75.8 per cent from 66.5 per cent a year earlier. The stock was up by 3 per cent at one stage but later closed a penny lower at 117p.

Renishaw set the pace in the FTSE 250 Index as the precision engineering firm reported record annual revenues of £355.5million and better-than-expected profits of £70.1 million. Shares jumped almost 23 per cent or 331p to 1801p.

The biggest risers on the FTSE 100 Index were Capita up 55p at 1210p, Rio Tinto up 54p at 3391p, Associated British Foods up 43p at 2874p and Marks & Spencer up 6.7p at 449.3p.

The biggest fallers on the FTSE 100 Index were GlaxoSmithKline down 73.5p at 1481.5p, SSE down 43p at 1498p, Hargreaves Lansdown down 20p at 1072p and Mondi down 17p at 1034p.

15.30: The Footsie slipped back in late afternoon trade, paring its gains as US blue chips started in negative territory weighed by some mixed corporate earnings, although the broader market in New York was higher.

With an hour of trading to go, the FTSE 100 index was 5.1 points higher at 6,800.3, having reversed from a session peak of 6,822.65, consolidating a strong 1 per cent bounce in the previous session.

In early deals on Wall Street, the blue chip Dow Jones Industrial Average was 6.5 points lower at 17,107.1 as investors weighed mixed earnings from Boeing, Delta Air Line and PepsiCo, and Whirlpool today.

Rate serve: Bank of England governor Mark Carney suggested that an early rate rise was very unlikely today as he shifted the focus of interest rate policy on to pay growth

But the broader S&P 500 index was up 5.0 points at 1,988.6, hovering near an intraday record, and the tech-laden Nasdaq Composite index was ahead 20.1 points at 4,476.1 helped by gains for tech giant Apple.

After the close yesterday, Apple reported its second straight quarter of double-digit percentage growth in iPhone sales as it heads into a major revamp of the firm's flagship product.

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The US data calendar was empty on Wednesday, but UK investors had a plethora of economic surveys and comments to interpret.

Chiefly, Bank of England governor Mark Carney suggested that an early rate rise was very unlikely today as he shifted the focus of interest rate policy on to pay growth.

In what critics will interpret as yet another swerve in 'forward guidance', the BoE boss said falling real incomes were one weakness that would predicate against testing the UK economy with an early rate hike.

His comments, made in a speech in Glasgow, echoed the minutes of this month's Bank policymakers' meeting released today, which showed the monetary policy committee is still too nervous about wage stagnation and a possible lull in the recovery to hike rates earlier than expected.

Kathleen Brooks, research director UK EMEA at FOREX.com said: ‘ After feeling pretty confident in recent weeks that Mark Carney and co. had shifted to a more hawkish policy stance, the market rushed to price in two rate hikes by the end of Q1 2015, the latest minutes have left the market scratching its head once more.

She added: ‘Carney doesn’t want the market to rest on its laurels, but equally, it doesn’t want the market to get too ahead of itself, as it invariably will try to do.

‘Thus, over the next few months, as the bank gears up to its first rate hike, central banks will be working hard to calibrate their messages, which could include regular bouts of contradictory statements.’

13.15: The Footsie held on to its modest gains at lunchtime helped by a strong session for mobile phone giant Vodafone and a 4 per cent jump by outsourcing firm Capita, although drugs giant GlaxoSmithKline was a drag as its latest earnings disappointed.

In early afternoon trade, the FTSE 100 index was up 10.2 points at 6,805.5, while European markets were also higher.

Markets have recovered their poise in recent sessions amid signs of an easing in tensions between Russia and the West over the downing of a passenger jet in Ukraine last week.

Vodafone boost: The mobiles phones giant gained after its former US partner Verizon reported a better-than-expected surge in second quarter revenues

Craig Erlam, markets analyst at Alpari (UK) said it appeared that investors were more concerned about economic data and earnings results than the conflicts in eastern Ukraine and the Gaza strip.

He added: ‘That's not to say that both of these don't have the potential to cause further disruptions and weigh further on investor sentiment, it just means that the risk associated with these events is fully priced in and there has been no new significant developments.’

Equity investors were encouraged as minutes from this month's Bank of England Monetary Policy Committee meeting showed they had detected signs of the slowing in the economy that had been expected in the second half of the year, perhaps pushing back the likelihood of a UK interest rate hike this year.

Stagnant wage growth was becoming more striking as it runs against a background of strong jobs recovery, the MPC minutes said.

Currency markets also took this as evidence rates might not go up earlier than expected, and the pound dropped back towards $1.70, having traded near $1.71 overnight. Against the euro, sterling also dropped from €1.270 to €1.265.

The nine MPC members voted unanimously to keep interest rates on hold at 0.5 per cent on July 10. The minutes showed the policymakers agreed that the recovery was looking more assured and some thought slack was being used up.

But data today also offered signs that showed any slowing in the economy could be short-lived.

Mortgage approvals increased for the first time in five months in June as stricter rules around home loan applications started to bed in, lenders reported today.

The British Bankers' Association data showed some 68,121 mortgages collectively worth £10 billion got the green light last month, marking a 4 per cent month-on-month increase in the number of approvals and the first monthly upswing seen since January.

And annual retail sales growth quickened in July and expectations for August also picked-up, a survey by the Confederation of British Industry said.

The CBI distributive trades survey's retail sales balance rose to +21 in July from +4 in June and above economists' forecasts of +16. Sales expectations for August were +36, up from +17 in July.

The data reinforced the idea that Britain is seeing a steady consumer-led recovery. Official data released in June showed retail sales dropped in May for the first time since January.

Blue chip retailers took this news positively, with clothing to food stores group Marks & Spencer adding 5.4p at 448, rival Next up 45p at 6,.550p, and DIY stores firm Kingfisher – which will issue a trading update later this week – ahead 1.6p at 338.9p.

Vodafone played a significant role in the Footsie’s gains as shares in the market heavyweight rose 1 per cent or 2.4p to 198.1p after its former US partner Verizon reported a better-than-expected surge in second quarter revenues as it benefits from strong demand from wireless customers. Vodafone is due to present its own figures on Friday.

Outsourcing firm Capita was at the top of the FTSE 100 leader board, ahead over 3 per cent, or 43p at 1,198p after it posted a 16 per cent rise in half-year underlying profits to £238million.

Capita said it secured £1.3billion of major contract wins in the six month period, while revenues improved 13.9 per cent to £2.1 billion.

But on the blue chip fallers board, GlaxoSmithKline shed 3 per cent, down 53p to 1,502p after the drugmaker reported a 22 per cent drop in core operating profits to £2.9billion for the first half of the year.

Pharmaceutical and vaccines sales were 4 per cent lower due to continued increased competition in the US respiratory market and generic competition to Lovaza.

09.15: The Footsie pushed a touch higher as the morning session progressed, recovering from an opening falls thanks to gains by heavyweight mobile telecom group Vodafone and miner BHP Billiton, although the mood was subdued ahead of the release of minutes from this month’s Bank of England Monetary Policy Committee meeting.

After an hour and a quarter of trading, the FTSE 100 index was 5.7 points higher at 6,801.0, consolidating yesterday’s 1 per cent jump made after an easing in tensions over the downing of a passenger jet in Ukraine after pro-Russian separatists released bodies from the crash site and handed over the aircraft's black boxes.

Gains were limited today as investors awaited minutes from the latest BoE policy meeting amid continued speculation that interest rates could rise sooner than expected, although no dissenting voices are expected this month as new committee members find their feet.

Minutes awaited: The latest BoE policy meeting minutes are again expected to show no dissenting voices as new committee members find their feet

Michael Hewson chief market analyst at CMC Markets UK said: ‘The recent mixed messages from UK policymakers about the likelihood of a rate rise this year has generated a lot of unnecessary heat to a debate about the timing of such a measure.

'This has invited some speculation that we may have got some dissent at the most recent Bank of England meeting about the timing of a possible tightening of policy.

‘The tone of the debate is likely to be of more interest to the markets that any change in voting patterns. It would be surprising if the voting patterns did change from the 9-0-0, but any signs of a shift in thinking with respect to the amount of spare capacity in the economy could well be considered hawkish,’ he added.

Mobile phone giant Vodafone lent its strength to the Footsie with traders encouraged by the performance of Vodafone's former US partner Verizon, which reported strong second quarter profits. Vodafone, which is due to present its own figures on Friday, rose 2.3p to 197.9p

BHP Billiton, the world's largest mining company by revenues, was in demand after posting a strong first half operating performance, with records achieved across its four commodity classes. Biliton shares added 16p at 2,070.5p.

Outsourcing firm Capita was also a blue chip gainer, up 3 per cent or 32.5p to 1,187.5p after its half-year results showed a 16 per cent rise in underlying profits to £238million. The update prompted broker Investec to upgrade its rating on the stock from hold to add.

But among the blue chip fallers, chemicals group Johnson Matthey dropped 77p to 2,982p after its first quarter results were affected, as expected, by currency headwinds and the loss of an important contract with platinum group Anglo American Platinum.

Outside the top flight, engineering group Renishaw leapt nearly 15 per cent higher, up 219p to 1,689p after it posted record annual revenues of £355.5million, up 2 per cent year-on-year despite currency headwinds, helped by a record fourth quarter.

And regional airline Flybe was 3 per cent higher, up 3.6p to 121.6p after chief executive Saad Hammad highlighted further progress in the company's turnaround.

Having recently announced its first profit in four years, Flybe said the first quarter had seen a jump in its load factor to 75.8 per cent from 66.5 per cent a year earlier.

08.30: The FTSE 100 has opened down 16.7 points at 6,778.7 as investors remain jittery over conflicts in Ukraine and the Middle East.

Upbeat corporate earnings reports and signs of co-operation between pro-Russian rebels and the West for an investigation into the shooting down of a Malaysian airliner prompted a global market rally yesterday.

The rebels handed over the plane's black boxes as European countries struggled to agree on sanctions for Russia - who they accuse of supporting Ukraine separatists - prompting a revival in the rouble and other Russian assets.

EU sanctions: Foreign Secretary Philip Hammond (pictured far right) joins other European ministers to consider further sanctions against Russia after the downing of the Malaysian jet in Ukraine

However, while meaningful sanctions were delayed, the EU was drafting extra measures on capital markets and defence that could spark tit-for-tat retaliation from Russia.

The situation in the Middle East, where Israel hit targets across the Gaza Strip and said no ceasefire was near, also kept investors on edge.

Air carriers in the US and Europe yesterday halted flights to Tel Aviv amid heightened fears about passenger safety following the loss of the Malaysia Airlines jet over Ukraine with nearly 300 aboard.

Jonathan Sudaria of Capital Spreads said: 'European equities are set to take a breather after yesterday’s gains. Despite tough talk and the beating drums of action during the prelude to the European Union foreign ministers' meeting, it didn’t amount to much other than a widening of Russian individuals on the naughty list.

'The inability of the EU members to rise above national self-interest was taken as a bullish sign by markets as they realised that Europe wouldn’t be throwing anything at Russia worth retaliating to and the major indices had one of their best days for months.

'However, Europe wasn’t completely void of back bone as tier three economy-crippling sanctions are penned for discussion on Thursday and the door to punitive economic sanctions on the Russian economy still remains ajar.

'The odds are of such sanctions being imposed is probably pretty low but while they are still on the agenda traders will have to tread cautiously.'

London Stock Exchange and SSE stocks will go ex-dividend today, trading without entitlement to their latest dividend payout and knocking 2.5 points off the index.

Stocks to watch today include:

BHP BILLITON: The global miner beat its own guidance for full-year iron ore output, saying it mined a record 225million tonnes in fiscal 2014, 4 per cent ahead of its forecast, leading productivity gains across a number of businesses.

BANKS: Britain's largest high street banks will announce next week that they are setting aside more than £1billion in additional provisions to compensate customers who were mis-sold payment protection insurance, Sky News reported.

ROYAL BANK OF SCOTLAND: The bank was 'wilfully obtuse' when giving evidence to lawmakers examining whether its corporate turnaround division had been used to make money out of small businesses, said chairman of parliament's Treasury select committee Andrew Tyrie. Read more here.